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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Interpublic Group of Companies Inc. (NYSE: IPG) back in 2016: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 03/15/2016


End date: 03/12/2021
Start price/share: $21.20
End price/share: $29.61
Starting shares: 471.70
Ending shares: 572.36
Dividends reinvested/share: $4.24
Total return: 69.48%
Average annual return: 11.14%
Starting investment: $10,000.00
Ending investment: $16,947.30

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 11.14%. This would have turned a $10K investment made 5 years ago into $16,947.30 today (as of 03/12/2021). On a total return basis, that’s a result of 69.48% (something to think about: how might IPG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Interpublic Group of Companies Inc. paid investors a total of $4.24/share in dividends over the 5 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of 1.08/share, we calculate that IPG has a current yield of approximately 3.65%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $21.20/share purchase price. This works out to a yield on cost of 17.22%.

One more piece of investment wisdom to leave you with:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham